SOS The Secrets of Property Bubble Unveil

The Secrets of Property Market Unveils

This is the conditions prior implosion of a property bubble:

• affordability ratio is exceeding the average


• rental yield is reaching historical low


• supply of units far exceed the demand


• speculators exceed genuine home buyers


• new historical prices are set


• financing is very easy


• deposit rates is historical low

Bubble is not build up in a single day. It takes years. In China, housing prices increases 5 to 10 times over the last 10 years. Rental yield is below 3%. The supply is way outstripping demand. Principally, if we walk through the conditions above, if it satisfy all of it, it means bubble is created. That doesn't mean it will go off. It need a catalyst to poke the bubble.

Some of the catalyst or sign:

• No one else can afford the property


• Government increase property gain tax


• Government increase interest rates


• Gearing in banks reach historical high


• Speculators panic and run due to sudden adverse economic data


• the taxi driver or an admin clerk talking about property

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Remember, nothing is absolute in property. The conditions that created the bubble will be the same factor that cause the bubble to implode. Watch out for the conditions, and the signs.

Some statistics that may cause panic:

1. 1997 housing crash in Malaysia, the bank exposure is 30% in property, today is 36%
2. the average affordabiity ratio 5.6 times, in KLCC, Mont Kiara, DPC, it is > 10 times, USA crash when the afforability ratio is 5 times.
3. excess property stock is about 22%
4. financing rates is historical low, RPGT is also very low at 5% compare with previous scale rate from 5% to 30%, a reintroduction may discourage speculator
5. Rental yield is very low

So, invest with care.